Making Sense of Non-Binding Retail-Price Recommendations

This paper provides a theoretical rationale for non-binding retail price recommendations (RPRs) in vertical supply relations. Analyzing a bilateral manufacturer-retailer relationship with repeated trade, we show that linear relational contracts can implement the surplusmaximizing outcome. If the manufacturer has private information about production costs or consumer demand, RPRs may serve as a communication device from manufacturer to retailer. We characterize the properties of efficient bilateral relational contracts with RPRs and discuss extensions to settings where consumer demand is affected by RPRs, and where there are multiple retailers or competing supply chains.vertical relationships, relational contracts, asymmetric information, price recommendations

Making Sense of Non-Binding Retail-Price Recommendations

We model non-binding retail-price recommendations (RPRs) as a communication device facilitating coordination in vertical supply relations. Assuming both repeated vertical trade and asymmetric information about production costs, we show that RPRs may be part of a relational contract, communicating private information from manufacturer to retailer that is indispensable for maximizing joint surplus. We show that this contract is self-enforcing if the retailer’s profit is independent of production costs and punishment strategies are chosen appropriately. We also extend our analysis to settings where consumer demand is variable or depends directly on the manufacturer’s RPRs.vertical relationships, relational contracts, asymmetric information, price recommendations

Delays in Leniency Application: Is There Really a Race to the Enforcer's Door?

This paper studies cartels’ strategic behavior in delaying leniency applications, a take-up decision that has been ignored in the previous literature. Using European Commission decisions issued over a 16-year span, we show, contrary to common beliefs and the existing literature, that conspirators often apply for leniency long after a cartel collapses. We estimate hazard and probit models to study the determinants of leniency-application delays. Statistical tests find that delays are symmetrically affected by antitrust policies and macroeconomic fluctuations. Our results shed light on the design of enforcement programs against cartels and other forms of conspiracy

In Vivo Ectopic Implantation Model to Assess Human Mesenchymal Progenitor Cell Potential

Clinical interest on human mesenchymal progenitor cells (hMPC) relies on their potential applicability in cell-based therapies. An in vitro characterization is usually performed in order to define MPC potency. However, in vitro predictions not always correlate with in vivo results and thus there is no consensus in how to really assess cell potency. Our goal was to provide an in vivo testing method to define cell behavior before therapeutic usage, especially for bone tissue engineering applications. In this context, we wondered whether bone marrow stromal cells (hBMSC) would proceed in an osteogenic microenvironment. Based on previous approaches, we developed a fibrin/ceramic/BMP-2/hBMSCs compound. We implanted the compound during only 2 weeks in NOD-SCID mice, either orthotopically to assess its osteoinductive property or subcutaneously to analyze its adequacy as a cell potency testing method. Using fluorescent cell labeling and immunohistochemistry techniques, we could ascertain cell differentiation to bone, bone marrow, cartilage, adipocyte and fibrous tissue. We observed differences in cell potential among different batches of hBMSCs, which did not strictly correlate with in vitro analyses. Our data indicate that the method we have developed is reliable, rapid and reproducible to define cell potency, and may be useful for testing cells destined to bone tissue engineering purposes. Additionally, results obtained with hMPCs from other sources indicate that our method is suitable for testing any potentially implantable mesenchymal cell. Finally, we propose that this model could successfully be employed for bone marrow niche and bone tumor studies. ELECTRONIC SUPPLEMENTARY MATERIAL: The online version of this article (doi:10.1007/s12015-013-9464-1) contains supplementary material, which is available to authorized users

Wage traps as a cause of illiteracy, child labor, and extreme poverty

When labor incomes approach subsistence levels, the labor supply curve slopes outward, because the fight for survival mandates households to look for longer work hours in response to falling wage rates. We explore conditions under which near-subsistence scenarios may imply wage traps, labor market failures that can be the cause of undernourishment, illiteracy, and child labor. After stating general conditions under which wage traps occur, we look at specific production functions typically employed in quantitative analyses of growth and development. We find that standard Cobb-Douglas production functions do not permit wage traps, whereas CES functions do. Beyond that it turns out that when subsistence requirements increase with work hours, and when work effort rises with the wage rate, up to the efficiency-wage threshold, wage traps become more likely. Measures such as bans on child labor, implementation of minimum wage laws, or the establishment of labor unions may quite effectively improve conditions in wage-trapped labor markets.Subsistence income Labor supply Poverty Child labor Wage trap Market failure

Wage Traps as a Cause of Illiteracy, Child Labor, and Extreme Poverty

When labor incomes approach subsistence levels, the labor supply curve slopes outward, because the fight for survival mandates households to look for longer work hours in response to falling wage rates. We explore conditions under which near-subsistence scenarios may imply wage traps, labor market failures that can be the cause of undernourishment, illiteracy, and child labor. After stating general conditions under which wage traps occur, we look at specific production functions typically employed in quantitative analyses of growth and development. We find that standard Cobb-Douglas production functions do not permit wage traps, whereas CES functions do. Beyond that it turns out that when subsistence requirements increase with work hours, and when work effort rises with the wage rate, up to the efficiency-wage threshold, wage traps become more likely. Measures such as bans on child labor, implementation of minimum wage laws, or the establishment of labor unions may quite effectively improve conditions in wage-trapped labor markets.Subsistence income, labor supply, poverty, child labor, wage trap, market failure, development, growth

Are There Waves in Merger Activity After All?

This paper investigates the merger wave hypothesis for the US and the UK employing a Markov regime switching model. Using quarterly data covering the last thirty years, for the US, we identify the beginning of a merger wave in the mid 1990s but not the much-discussed 1980s merger wave. We argue that the latter finding can be ascribed to the refined methods of inference offered by the Gibbs sampling approach. As opposed to the US, mergers in the UK exhibit multiple waves, with activity surging in the early 1970s and the late 1980s.MergerWaves; Markov Regime Switching Regression Model; Gibbs Sampling

Merger negotiations and ex-post regret

We consider a setting in which two potential merger partners each possess private information pertaining both to the profitability of the merged entity and to stand-alone profits, and we investigate the extent to which this private information makes ex-post regret an unavoidable phenomenon in merger negotiations. To this end, we consider ex-post incentive compatible mechanisms, which use both players' reports to determine whether or not a merger will take place and what each player will earn in each case. When the outside option of at least one player is known, the efficient merger decision can be implemented by such a mechanism under plausible budget-balance requirements. When neither outside option is known, we show that the potential for regret-free implementation is much more limited, unless the budget balance condition is relaxed to permit money-burning in the case of false reports.Mergers Mechanism design Asymmetric information Interdependent valuations Efficient mechanisms